In the weekend WSJ: Dave Kansas: "Unconventional Wisdom: Stocks Do Beat Funds". The article promotes buying individual dividend producing stocks for those who have the risk tolerance. He points to the good ole days when Mom and Pop bought shares of AT&T, GM, and IBM for the dividend income and held on to them forever.
Unconventional wisdom becoming conventional?(3 posts)
I take a middle position.
There is an important sense in which indexing has been oversold. Indexers have been told that they will do better than stock pickers. I don't buy it. I think that effective stock pickers are always going to do better.
The other side of the story (in my view!) is that it is only a small percentage of investors that possesses the skills to pick stocks effectively. I believe that the majority of investors really are better off in indexes.
I am a big believer in indexes (my writing is aimed at the average person, the ones who are unlikely to do well at stock picking). But I think indexing is being given a bad name by those overselling it. Indexers have been told that stock pickers cannot do better and as more and more evidence comes in showing that they do, people naturally become disillusioned with indexing. It's not indexing's fault! It is the fault of people who stretch the truth in their efforts to market indexing.
Indexing is wonderful. But it is what it is. It is a simple "good enough" strategy for the millions of middle-class people who do not have the skill or inclination to do the research needed to pick stocks effectively.
I like to do some of both.
I enjoy picking individual stocks of companies that have grown their dividends for at least a decade or more and look like they will continue to be able to do so for the foreseeable future. I use the "buy and watch" approach here.
I also believe in owning a broad index because I'm sold on Warren Buffett's advice that a broad index fund is "extreme diversification" where you are investing in the greatest economic machine in the world -- the U.S. economy. I use the "buy and forget" approach here.
About 80 percent of my invest-able assets are in managed accounts and the rest are in self-directed investments.
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